April 30, 2014

Republicans Love Big Business So Much, They Forget About Reducing the Deficit

Whenever Democrats propose new legislation that requires additional spending, Republicans demand a spending offset. But the GOP has finally found something they covet so much that they're willing to break that rule: tax breaks for big business.

Two bills working their way through Congress address the more than 50 tax breaks—known as “tax extenders”—that expired at the end of 2013. These tax deductions and credits are primarily for big business. Congress has typically renewed them at the end of each year, but failed to do so at the end of 2013. Both parties are eager to extend them once again, thanks to an intense lobbying effort.

Earlier this month, Democrats on the Senate Finance Committee passed a two-year extension of all 50-odd extenders with no spending offset. It would increase the deficit by $85 billion. On Tuesday afternoon, Republicans on the House Ways and Means Committee approved a bill to expand six of these tax breaks and make them permanent. The legislation would increase the deficit by $310 billion over the next decade, plus an additional $68 billion in interest costs.

While the Democratic position is difficult to justify given their supposed concerns about the deficit, the Republican one blatantly conflicts with the party's years-long obsession with austerity. Republicans such as Senate Minority Leader Mitch McConnell have argued that past extensions weren't paid for, so this one shouldn’t be either. But the House bill will increase the deficit by nearly $378 billion—no historical precedent will change that.

It’s astonishing how quickly Republicans are willing to give up hundreds of billions of dollars in deficit reduction after fighting Democrats over deficit reduction the past few years. Farm Bill negotiations dragged on for months and ended with $8.6 billion in cuts over a decade. The Ryan Budget cuts $135 billion from food stamps alone—a significant amount, but less than half of what the House tax-extender bill will cost. Even President Obama’s plan to expand the Earned Income Tax Credit—which Republicans support in policy, but disagree on the offset—costs only $60 billion over a decade.

Source: Congressional Budget Office, Ryan Budget

The Republican position on unemployment insurance is even more hypocritical. The same day that Ways and Means passed the six tax extenders, Republican Senator Dean Heller called House Speaker John Boehner to lobby him on the Senate UI bill. The cost of the extension is just $9.7 billion and even includes a spending offset, although most of it ($6.1 billion) comes from a budget gimmick. But Boehner said the deal needs a full offset and a job-creation measure—despite a Congressional Budget Office finding that a UI extension would help the economy.

That’s the current Republican position. At the same time as they are passing a tax bill that would increase the deficit by nearly $400 billion, they oppose an extension of unemployment benefits that would cost $6.1 billion. On one hand, you have big businesses investing in the U.S. economy. On the other, more than a million long-term unemployed Americans struggling to find work. If that isn’t a statement of Republican priorities, I don’t know what is.